Pension protection

Lump sum allowance and lump sum and death benefit allowance protection

It is currently possible to protect benefits from income tax if they exceed the lump sum allowance and lump sum and death benefit allowance. This protection has the effect of locking the lump sum allowance and lump sum and death benefit allowance a certain rate, meaning the reduction won't apply. However, there are conditions which, if broken, will result in protection being lost.

• Fixed protection
• Individual protection

Protecting Pre 6 April 2006 benefits and tax-free cash

Pensions legislation changed on 6 April 2006. However, it was possible to protect existing benefits.

Protecting benefits

It was possible for members of pension schemes set up before 6 April 2006 to protect the benefits that they already had. There were 2 types of protection - primary protection and enhanced protection.

• Primary and enhanced protection

Protecting tax-free cash

Individuals who had a right to more than 25% tax-free cash on 6 April 2006 and who didn't opt for protection (see above) may still have their tax-free cash entitlement protected. This is called scheme specific protection.

• Protection of scheme specific tax-free lump sum

Tax-free cash protection on transfer

Protecting tax-free cash on transfer is, and always has been, one of the most popular queries we receive. More specifically, what happens if an individual who is entitled to tax-free cash of more than 25% is transferring to another plan?

• Tax-free cash protection on transfer
• Some common questions

Our frequently asked questions

Here we look at some of the questions we are asked most often. 

• Frequently asked questions